Topic 5: Product strategy & New Product Development

Transcription

1 Topic 5: Product strategy & New Product Development

2 Definitions Product Anything offered to a market for attention, acquisition, use, or consumption that might satisfy a need or want. Service A form of product that consists of activities, benefits or satisfactions offered for sale that are essentially intangible and do not result in the ownership of anything. 2

3 What is a Product? Products, Services, and Experiences Market offerings may consist of a combination of goods and services Experiences are used to differentiate offerings Levels of Product and Services Core benefit, actual and augmented product Product and Service Classifications Consumer products and industrial products 3

4 Levels of a product Figure 14.2: Five Product Levels 3 original levels (later expanded to5): The Smart Car Example Core product - vehicle for personal transportation Actual product (basic + expected) - features, styling, packaging, brand name, quality (e.g. Smooth, efficient engine; clean interior and appealing interior fabrics; 5-speed gear box; tyres) Augmented product - after sales service, installation, delivery and credit, warranty (e.g. Softip sequential 6-speed transmission; parking convenience; fun-loving image; after sales service Note: all these need to be matched to target customer s needs. 4

5 Activity A variation of Activity 5.1 Q1: Consider a Nike product and break them down into the 3 or 5 levels of a product to see what is actually being purchased by a Nike customer. Q2: What factors have lead to Nike s marketing success? Branding and innovation formed Nike s mainstream marketing strategy 5

6 What is a Product? Types of Consumer Products Convenience Shopping Specialty Unsought Frequent purchases bought with minimal buying effort and little comparison shopping Low price Widespread distribution Mass promotion by producer Goal 1: Understand products and their classifications 6

7 What is a Product? Types of Consumer Products Convenience Shopping Specialty Unsought Less frequent purchases More shopping effort for comparisons. Higher than convenience good pricing Selective distribution in fewer outlets Advertising and personal selling Goal 1: Understand products and their classifications 7

8 What is a Product? Types of Consumer Products Convenience Shopping Specialty Unsought Strong brand preference and loyalty, requires special purchase effort, little brand comparisons, and low price sensitivity High price Exclusive distribution Carefully targeted promotions 8

9 What is a Product? Types of Consumer Products Convenience Shopping Specialty Unsought Little product awareness and knowledge (or if aware, sometimes negative interest) Pricing varies Distribution varies Aggressive advertising and personal selling by producers and resellers Goal 1: Understand products and their classifications 9

10 Product and Service Classifications Consumer products Industrial products Materials and parts Capital items Supplies and services 10

11 Product and Service Classifications Organizations, persons, places, and ideas Organizational marketing makes use of corporate image advertising Person marketing applies to political candidates, entertainment sports figures, and professionals Place marketing relates to tourism Social marketing promotes ideas 11

12 Tangibility /Intangibility pure tangible good -salt tangible good with accompanying service - cars hybrids - restaurants major service with accompanying minor goods - airline trip pure service - education/babysitting 12

13 Characteristics of services and how to address them intangible - not touched (tasted, smelt) before purchase - so tangibilise it as in smooth as silk inseparability - produced and consumed at the same time - try hard to increase productivity eg have bigger classes, if possible variability - people are involved and are variable! - so standardize, use internal marketing perishability - cannot store - use forecasting, match demand and supply as necessary 13

14 Product and Service Decisions Key Decisions Individual Product Product Line Product Mix Product attributes Quality, features, style and design Branding Packaging Labeling Product support services Goal 2: Learn decisions companies make regarding products 14

15 Break 15

16 Product and Service Decisions Key Decisions Individual Product Product Line Product Mix Product line A group of products that are closely related because they may: function in a similar manner be sold to the same customer groups, be marketed through the same types of outlets fall within given price ranges 16

17 Product and Service Decisions Key Decisions Individual Product Product Line Product Mix Product line length Line stretching: adding products that are higher or lower priced than the existing line Line filling: adding more items within the present price range 17

18 Product and Service Decisions Key Decisions Individual Product Product Line Product Mix Product mix Also known as product assortment Consists of all the product lines and items that a particular seller offers for sale Goal 2: Learn decisions companies make regarding products 18

19 Product and Service Decisions Key Decisions Individual Product Product Line Product Mix Product mix width: Number of different product lines carried by company Product mix depth: Number of different versions of each product in the line Product mix consistency Goal 2: Learn decisions companies make regarding products 19

20 Services marketing mix - 7Ps Product, Price, Place, Promotion + People Process Physical evidence 20

21 Product decisions product attributes - providing benefits matched to segment needs (actual product) Branding packaging - protection and promotion product support services - additional differentiators (augmented product) 21

22 Six categories of (decreasingly risky) new products = reasons to do it cost reductions repositioning of existing products to new markets or segments (ie market development) improvements and revisions of existing products (most new products) additions to existing product lines (eg flavors) new product lines - a firm enters an established market for the first time new-to-the-world (only 10 to 20%) : i-pod 22

23 Why do new products fail? Research indicates marketing reasons rather than technological ones: What about the New Coke Zero? over-estimation of demand ineffective marketing mix under-estimated competition 23

24 Why do some (only about 20%!) new products succeed? unique superior product well-defined product before development ie target market, product requirements and benefits a deep understanding of customer needs market attractiveness a clearly defined and well-managed New Product Development process teamwork between departments + a match corporate objectives/resources 24

25 Eight stages of New Product Development 1 Idea generation - lead users, employees... 2 Idea screening - profitable, compatible? 3 Concept development and testing - what will customer segments like, in detail? 4 Marketing strategy development - goals, 4Ps 5 Business analysis - will it make us a profit? 6 Product development - engineer prototype? 7 Market research/testing - meet sales projections? 8 Commercialization-produce, distribute, promotion Cost 25

26 1. Idea generation New product ideas come from: customers: research eg focus groups, complaints formal R&D check out competitors employees - suggestion schemes ask sales force (they are close to customers) distributors and suppliers other - trade mags, exhibitions, agencies 26

27 2. Idea screening An objective process to spot good ideas and drop poor ones: don t be too tough (eg photocopier by IBM) or slack use a simple rating process - a committee calculates overall probability of success = p (technical) x p (commercialisation) x p (profit) 27

28 3. Concept development & testing Concept development a detailed version of the idea expressed in consumer terms (i.e. benefits!), vis-à-vis whole market and competitors in selected segment eg which is best idea for a milk nutritional additive in: (i) busy adults breakfast (ii) childrens lunch snack (iii) older adults evening drink? Adding LB etc Concept testing testing the concepts with target customers, including an intention-to-buy question 28

29 4. Marketing strategy A preliminary marketing strategy statement covering: target market and planned positioning sales, market share and profit goals outline marketing mix strategies marketing budgets longer term profit/sales goals and marketing strategy 29

30 5. Business analysis Evaluates business attractiveness reviewing: sales costs profit projections + do they meet corporate guidelines/objectives? 30

31 6. Product development Developing the product concept into a physical product + testing so far it has been a idea but can it actually be made? build prototypes ----car shows alpha (internal) and beta (customer) testing 31

32 7. Market Testing Should we market test? is testing worth it? v risk? do we have time? is there a security risk (competitors)? only small number of customers The purpose of market testing: Reduce risk Test all components of mix 32

33 8. Commercialization We need a marketing plan to support the launch of the new product in the market, addressing: when? where? to whom? how? 33

34 Topic 6: Knowing your customer Core issue: how and why do customers want to buy our products? Agenda: Consumer buying behaviour the decision making process the decision making unit types of buying situation influences on buying behaviour Business buying behaviour 34

35 Case Study Harley Davidson Building Success Measuring Success Understanding the customers emotions and motivation Determining the factors of loyalty Translating this information to effective advertising Currently 22% of all U.S. bike sales Demand above supply Sales doubled in the past 5 years with earnings tripled. 35

36 Consumer buying behaviour 1. What steps do YOU go through when you purchase a product? 2. Do these steps vary for different products? 36

37 Three types of consumer buying situations Three types of consumer buying situations 1. routine response (e.g. Coke Zero).promotion tends to drive success here 2. limited problem solving (e.g. car tyres) 3. extensive problem solving (e.g., house, overseas holiday, MBA program) 37

38 The consumer decision making process (DMP) 1 Problem/need recognition (the trigger? e.g. car bill? ) 2 Information search about the awareness set (sources used - personal, commercial, public and/or experiential?) 3 Evaluation of alternatives (criteria and weights?) consideration set 4 Purchase intention and decision (how to influence others attitudes and situations?) 5 Post-purchase behaviour (how to keep relationship & minimise expectations/performance 38 dissonance?

39 3 Evaluation of alternatives Steps between evaluation of alternatives and a purchase decision within step 4 Attitude of others 4a Purchase intention 4b Purchase decision Unanticipated situational factors 39

40 Activity Class Activity Consider your selection of a post graduate program in relation to the consumer decision making process: Did the 5 stages of the consumer decision making process apply? If any stages were/are missed.. why? Give examples of what you did at each stage of the process What sources of information did you consider at each stage? What else were you influenced by at any stage of the process? 40

41 The decision making unit (DMU) Who is involved? (as Kotler) Suggester Purchaser Adviser Decider End user (Initiator) (Buyer) (Influencer) (Decider) (User) 41

42 Overall model of consumer buying behaviour Marketing stimuli Product Price Place Promotion Other stimuli Political/legal Economic/ Demographic Social & cultural Technological Buyer s characteristics Cultural Social Personal Psychological Buyer s decision process =DMP 1 Problem recognition 2 Information search 3 Evaluation 4 Decision 5 Post-purchase behavior Buyer s decisions Product choice Brand choice Dealer choice Purchase timing Purchase amount 42

43 Influences on buying behavior What factors influence consumer behaviour? cultural - culture, sub-culture, social class social - reference groups, family, roles, status personal - age, occupation, lifestyle, personality, economic circumstances psychological - motivation, perception, learning, beliefs and attitudes 43

44 Characteristics Affecting Consumer Behavior Cultural Social Key Factors Personal Psychological Culture Forms a person s wants and behavior Subculture Groups with shared value systems Social Class Society s divisions who share values, interests and behaviors 44

45 Characteristics Affecting Consumer Behavior Cultural Social Key Factors Personal Psychological Groups Membership Reference Aspirational Opinion Leaders Buzz marketing Family Many influencers Roles and Status 45

46 Characteristics Affecting Consumer Behavior Cultural Social Key Factors Personal Psychological Age and life cycle Occupation Economic situation Lifestyle Activities, interests and opinions Lifestyle segmentation Personality and self-concept 46

47 Break 47

48 Characteristics Affecting Consumer Behavior Brand Personality Dimensions Sincerity Ruggedness Excitement Competence Sophistication 48

49 Characteristics Affecting Consumer Behavior Cultural Social Key Factors Personal Psychological Motivation Perception Learning Beliefs and attitudes 49

50 Psychological Factors Motivation A motive is a need that is sufficiently pressing to direct the person to seek satisfaction Motivation research is based on Freud; Looks for hidden and subconscious motivation Maslow ordered needs based on how pressing they are to the consumer 50

51 Psychological Factors Perception Perception is the process by which people select, organize, and interpret information Perception Includes: Selective attention Consumers screen out information Selective distortion People interpret to support beliefs Selective retention People retain points to support attitudes 51

52 Psychological Factors Learning Learning describes changes in an individual s behavior arising from experience Learning occurs through: Drives Internal stimulus that calls for action Stimuli Objects that move drive to motive Cues Minor stimuli that affect response Reinforcement Feedback on action 52

53 Psychological Factors Beliefs and Attitudes Belief a descriptive thought about a brand or service may be based on real knowledge, opinion, or faith Attitude describes a person s evaluations, feelings and tendencies toward an object or idea They are difficult to change 53

54 Types of Buying Decision Behavior Complex Highly involved, significant brand differences Example computer Dissonance-reducing Highly involved, little brand differences Example carpeting Habitual Low involvement, little brand differences Example salt Variety-seeking Low involvement, significant perceived brand differences Example cookies 54

55 The Buyer Decision Process Process Stages Need recognition Information search Evaluation of alternatives Purchase decision Postpurchase behavior Needs can be triggered by: Internal stimuli Normal needs become strong enough to drive behavior External stimuli Advertisements Friends of friends 55

56 The Buyer Decision Process Process Stages Need recognition Information search Evaluation of alternatives Purchase decision Postpurchase behavior Consumers exhibit heightened attention or actively search for information. Sources of information: Personal Commercial Public Experiential Word-of-mouth 56

57 The Buyer Decision Process Process Stages Need recognition Information search Evaluation of alternatives Purchase decision Postpurchase behavior Evaluation procedure depends on the consumer and the buying situation. Most buyers evaluate multiple attributes, each of which is weighted differently. At the end of the evaluation stage, purchase intentions are formed. 57

58 The Buyer Decision Process Process Stages Need recognition Information search Evaluation of alternatives Purchase decision Postpurchase behavior Two factors intercede between purchase intentions and the actual decision: Attitudes of others Unexpected situational factors 58

59 The Buyer Decision Process Process Stages Need recognition Information search Evaluation of alternatives Purchase decision Post-purchase behavior Satisfaction is important: Delighted consumers engage in positive word-of-mouth. Unhappy customers tell on average 11 other people. It costs more to attract a new customer than it does to retain an existing customer. 59

60 Buyer Decision Process for New Products New Products Good, service or idea that is perceived by customers as new. Stages in the Adoption Process Marketers should help consumers move through these stages. 60

61 Buyer Decision Process for New Products Stages in the Adoption Process Awareness Evaluation Interest Trial Adoption In Short; AIDA process 61

62 Buyer Decision Process for New Products Individual Differences in Innovativeness Consumers can be classified into five adopter categories, each of which behaves differently toward new products. Product Characteristics and Adoption Five product characteristics influence the adoption rate. 62

63 Buyer Decision Process for New Products Product Characteristics Relative Advantage Compatibility Complexity Divisibility Communicability 63

64 Buyer Decision Process for New Products International Consumer Behavior Values, attitudes and behaviors differ greatly in other countries. Physical differences exist which require changes in the marketing mix. Customs vary from country to country. Marketers must decide the degree to which they will adapt their marketing efforts. 64

65 Business buying behaviour (B2B) B2B is different from B2C(consumer) fewer buyers e.g. big 3 carmakers larger buyers close supplier-customer relationships geographically concentrated buyers e.g. in capital cities derived demand (derived from end-consumer demand) inelastic demand (e.g. shoemakers won t buy more leather if it is cheap, but price can be an important consideration) fluctuating demand (is an effect of inventories in chain) professional purchasing by purchasing managers 65

66 Types of B2B buying behaviour Custom furniture Installed components Buildings 3 First task task buying Involved decision making in types of B2B buying behavior Utilities Office supplies Bulk chemicals 2 Modified rebuy New vehicles Elec. equip Consultants Computer equip. 1 Straight rebuy 66